When taxes increase and all else stays constant, the IS curve
A) shifts to the left.
B) shifts to the right.
C) stays the same.
D) none of the above.

Question

Quizplus · Accepted Answer

An increase in taxes reduces consumers' disposable income, leading to a decrease in consumption. This decrease in consumption causes a downward shift in the aggregate demand, which is represented by a leftward shift of the IS curve in the IS-LM model.

When Taxes Increase and All Else Stays Constant, the IS